Index of Production, UK: February 2020

• Total production output decreased by 0.6% for the three months to February 2020, compared with the three months to November 2019; this was led by manufacturing output, which fell by 0.4%.

• The three-monthly fall in manufacturing is because of widespread weakness, with 8 of the 13 subsectors providing downward contributions; this was led by machinery and equipment not elsewhere classified, which fell by 3.4%.

• Production output rose by 0.1% between January 2020 and February 2020, with manufacturing providing the largest upward contribution, rising by 0.5%; this was partially offset by falls from water and waste (1.3%), electricity and gas (0.8%), and mining and quarrying (1.0%).

• The monthly increase of 0.5% in manufacturing output was led by basic pharmaceutical products, which rose by 3.5%; of the 13 subsectors, 9 displayed upward contributions, indicating that overall strength was widespread.

• For the three months to February 2020, production output decreased by 2.6%, compared with the three months to February 2019; this was led by a fall in manufacturing of 3.5% where all 13 subsectors displayed downward contributions.

• The period covered by this release is 1 February to 29 February and is largely unaffected by recent developments with the coronavirus (COVID-19); however, we have observed a reduction in exports of motor vehicles to China, and some UK busineses have experienced partial factory shutdowns after supply chains in China were impacted.

Total production output for the three months to February 2020 fell by 0.6%, compared with the three months to November 2019. This is the 10th consecutive three-monthy fall in output since April 2019. This is the longest run of consecutive periods of three-monthly weakness since a run of 11 consecutive periods, from September 2011 to July 2012.

Manufacturing output provided the largest downward contribution (Figure 1), falling by 0.4%; this was led by widespread weakness throughout the sector, with negative contributions from 8 of the 13 subsectors. This was supported by downward contributions from electricity and gas, which fell by 2.6%, mainly because of higher than average temperatures reducing demand, and mining and quarrying, which fell by 3.9%. In contrast, water and waste provided the only upward contribution, rising by 1.2%.

The Index of Production (IoP) displayed an upward trend from the beginning of 2016 until it peaked during August 2018. Since then, the index has displayed a downturn, although some volatility around the planned Brexit dates has impacted that trend, particularly during the early part of 2019.

The Index of Manufacturing (IoM) displayed an upward trend from the beginning of 2016 until January 2018. Output remained relatively stable during the first half of 2018, before a gradual downturn. The index has declined sharply since early 2019, impacted by volatility around the UK’s proposed Brexit dates, during March and October 2019. Additionally, the current three-monthly rolling index level is only 0.7% higher, compared with January 2016.

For further detail on the longer-term trend within manufacturing, please see the article, Manufacturing sector performance, UK: 2008 to 2018, released 2 April 2019. The article provides an overview of the changes in the manufacturing sector between 2008 and 2018, focusing on the industries that have grown or shrunk the most.

Total manufacturing output for the three months to February 2020 fell by 0.4%, compared with the three months to November 2019. This is the 10th consecutive three-monthly fall, highlighting the ongoing decline in output since early 2019. Of the 13 subsectors, 8 displayed negative contributions; these were led by:

• machinery and equipment not elsewhere classified, which fell by 3.4%; this was a continuation of longer-term weakness since the beginning of 2019, highlighted by the three months on same three months a year ago indicator, which fell by 9.1%

• transport equipment, which fell by 1.9%, caused by weakness from motor vehicles, trailers and semi-trailers, which fell by 4.3%; this industry is showing a longer-term decline, as highlighted by the three months on same three months a year ago indicator, which fell by 8.7%

• food, beverages and tobacco, which fell by 1.3%, mainly because of export-driven weakness during December 2019 and January 2020 within alcoholic beverages, which fell by 3.3%; this was supported by a 3.2% fall from meat products mainly because of weakness during January 2020

In contrast, only five subsectors displayed upward contributions, led by:

• rubber and plastic products (3.3%) because of widespread strength across the subsector, which is a bounce back following a particularly weak November 2019 position

• basic pharmaceutical products (2.8%), mainly because of export-led growth from large businesses

Monthly manufacturing output in February 2020, compared with January 2020, rose by 0.5%; this is the third consecutive rise. There is widespread strength across the sector this month, with 9 of the 13 subsectors displaying upward contributions. Despite a generally positive picture, the two largest upward contributions have caused the overall strength. The cumulative impact from the remaining upward and downward contributions effectively offset each other (Figure 4).

Current monthly growth was led by:

• basic pharmaceutical products (3.5%) because of widespread export-led strength; however, there is no anecdotal evidence of any impact from the coronavirus (COVID-19) during February 2020

• widespread strength across food, beverages and tobacco (1.4%), led by a bounce back from a weak January 2020 position for meat products (2.3%) and other food products (2.0%)

• basic metals and metal products (0.9%), mainly because of strength from large businesses within fabricated metal products (1.1%) and weapons and ammunition (5.4%)

• other manufacturing and repair (0.9%), led by cumulative strength from large businesses following a weak January 2020 position

Partially offsetting growth and providing the largest downward contributions were:

• chemicals and chemical products, which fell by 1.6%, led by widespread weakness from large businesses

• machinery and equipment, which fell by 1.3%; this is a continuation of a longer-term decline for this subsector, and because of COVID-19, responder-led evidence suggested that supply chains with China have been impacted, resulting in some partial UK factory shutdowns

• within transport equipment, the motor vehicles, trailers and semi-trailers industry fell by 1.9%, mainly because of weaker exports to China impacted by COVID-19; in contrast, production of newer models has helped domestic turnover exceed export turnover (Figure 5)

The Society of Motor Manufacturers and Traders (SMMT) also highlight a 3.1% fall in exports of motor vehicles during February 2020, compared with February 2019. During 2019, the Asian market (China, Japan and South Korea) accounted for around 10% of global demand for British cars.

For the three months to February 2020 compared with the same three months to February 2019, total manufacturing output declined by 3.5%; this is the largest fall since a 3.6% fall in December 2009.

This is also the 10th consecutive three months compared with the same three months a year ago decline, further highlighting weakness throughout 2019 and into the beginning of 2020 (Figure 6).

There was widespread weakness, with all 13 subsectors providing downward contributions. During February 2020, weakness was led by:

• a continuation of long-term weakness since September 2018 for machinery and equipment, which fell by 9.1%; this was the strongest fall since January 2016, when output fell by 10.4%

• transport equipment, which fell by 5.1%; this is a continuation of ongoing weakness since June 2018, led by motor vehicles, trailers and semi trailers, which fell by 8.7%

• widespread weakness from chemicals and chemical products, which fell by 7.0%; this is a continuation of weakness since May 2019

• a continuation of weakness since May 2019 from wood, paper products and printing, which fell by 4.6%

Elsewhere, notable weakness during the three months to February 2020 within food, beverages and tobacco and basic pharmaceutical products needs to be contrasted with strength displayed by both subsectors during the three months to February 2019. Some of this strength was attributable to increased exports because businesses changed the timing of their activity as they approached the original planned date for the UK’s withdrawal from the EU at the end of March 2019.

Because of reduced output from oil and gas extraction, both longer-term indicators display a decline in output, with three-monthly and three months compared with the same three months a year ago sector-level growth falling by 3.9% and 2.2% respectively.

At sector level, the three month on a year ago indicator is the ninth consecutive fall, indicating a slowdown in output during most of 2019 and into 2020. This followed the positive impact of newer oil fields coming online, which helped to steady growth during 2017 and 2018.

The monthly indicator for February 2020 displays a 1.0% fall because of widespread weakness. This was led by a 4.0% fall from other mining and quarrying, following a strong January position. Weakness was mainly because of a lack of oil exports during February.

Both electricity and gas supply industries provided downward contributions across all three indicators during February 2020, mainly because of reduced demand owing to higher-than-average temperatures. The Met Office reported that the provisional UK mean temperature was 5.1 degrees Celsius, which is 1.4 degrees Celsius above the 1981 to 2010 long-term average.

Overall growth across both longer-term indicators was led by the sewerage industry during February 2020, which displayed upward contributions to three-monthly (2.5%) and three-monthly on a year ago (6.4%) growth. In contrast, monthly growth for sewerage fell by 1.3%.

The three months on same three months a year ago growth of 2.6% for the waste collection industry highlights the longer-term impact of work carried out on waste treatment projects. However, monthly output declined by 3.6% for this industry because of widespread weakness from large businesses, causing the sector-level decline of 1.3%.

The reporting period for this publication is the calendar month of February 2020. As part of our Monthly Business Survey (MBS), we encourage businesses to provide us with comments and anecdotal information to help interpret individual data returns. Some of these may be helpful in a deeper understanding of the factors that may be impacting business. This has been made easier by the move to an online survey during May 2019.

In the entire MBS sample of approximately 34,000 businesses covering the production, manufacturing and services sectors, approximately 1,500 of these provided us with comments and anecdotal evidence. From these responses, we were able to identify approximately 400 that referenced the coronavirus (COVID-19) and 240 that referenced the weather. Comments varied widely, from these factors showing no effect, showing a positive effect on the turnover or showing a negative effect on the turnover to expectations for upcoming months. The most pertinent comments have informed our interpretation of the data within this bulletin. Overall, we identified a negative but negligible effect on the aggregated data.

The weather

The Met Office stated that the UK experienced a record amount of rainfall for the month of February, which was also the fifth-wettest calendar month in a series since 1862. However, little impact has been seen within production because of this weather effect. Weather conditions and temperatures can often impact demand for the mining and quarrying and electricity and gas sectors, but they have not seen an impact from flooding in February.

Coronavirus (COVID-19)

This publication covers the period 1 February to 29 February 2020 and so is largely unaffected by recent developments. An impact can be seen, though, on the transport equipment sector, relating to a reduction in exports of motor vehicles to the Asian market (China, Japan and South Korea), and the manufacturing not elsewhere classified subsector, where some UK businesses have had factory shutdowns after supply chains in China were impacted.

See Measuring the data for more information about the implications of COVID-19 for the collection of our statistics.

Leap year

The month of February 2020 also includes a leap year, meaning that there was an extra day of trading on 29 February. Seasonal factors in the calculations will account for this pattern, so no effect will be seen in the seasonally adjusted estimates.

Index number

The index number is a measure of the average level of prices, quantities or other measurable characteristics relative to their level for a defined time period or location.

Industrial classification or breakdown

The industrial classification or breakdown is the internationally standardised method for classifying the wide range of industrial sectors in an economy. We use the Standard Industrial Classification 2007 (SIC 2007) for industrial breakdowns.

Manufacturing

The manufacturing sector includes the output of manufacturing industries and is broken down into 13 subsectors.

Monthly Business Survey

The Monthly Business Survey (MBS) collects information on the monthly turnover of UK businesses within the production and services sectors from various industrial sectors and regions in the UK.

Production

The production sector includes the output in the manufacturing (the largest component of production), mining and quarrying, energy supply, and water supply and waste management industries.

Turnover

The turnover of a company is the value of the goods or services sold during a particular time period. It includes total takings or invoiced sales and receipts. Interest and similar income, other operating income, and extra ordinary income is excluded. Value Added Tax (VAT) invoiced to the customer is excluded.

The Index of Production (IoP) uses data from a variety of sources and is calculated by taking turnover and removing the impact of price changes or by using direct volume estimates.

The majority of these data are collected as “turnover values” through the Monthly Business Survey (MBS). In addition, direct volume series are collected by the Department for Business, Energy and Industrial Strategy (BEIS) and the International Steel Statistics Bureau (ISSB) for steel industries.

From January 2018, Value Added Tax (VAT) data have also been included across 64 production industries for small and medium-sized businesses. For more information, see VAT turnover data in national accounts: background and methodology.

A comprehensive list of the IoP source data can be found in the Gross domestic product (GDP(O)) source catalogue (XLS, 715KB).

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the UK Index of Production QMI.

After EU withdrawal

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our national accounts statistics in line with the UK Statistics Authority’s Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards.

The Withdrawal Agreement outlines a need for UK Gross National Income (a fundamental component of the national accounts, which includes gross domestic product (GDP)) statistics to remain in line with those of other EU countries until the EU budgets are finalised for the years in which we were a member. To ensure comparability during this cycle, the national accounts will continue to be produced according to European System of Accounts (ESA) 2010 definitions and standards.

Coronavirus (COVID-19)

The Office for National Statistics’ (ONS’) MBS is fully online, meaning that business owners can logon from any location and submit their data at an appropriate time. Most other data in the IoP come from the BEIS and therefore will be less impacted than survey data.

Our latest data and analysis on the impact of the coronavirus (COVID-19) on the UK economy and population is now available on a new webpage. This will be the hub for all special COVID-19-related publications, including the fortnightly Business Impact on Coronavirus (COVID-19) Survey (BICS).

The ONS has released a public statement on COVID-19 and the production of statistics. Specific queries must be directed to the Media Relations Office.

Seasonal adjustment

The data published in the Index of Production (IoP) release are all seasonally adjusted (although non-seasonally adjusted estimates are also available). This aids interpretation by removing annually recurring fluctuations, for example, those caused by holidays or other seasonal patterns.

Data volatility

Care should be taken when using the month-on-month growth rates as data can be volatile. Longer-term growth rates and examination of the time series allow for better interpretation of the statistics.

Comparability with UK trade statistics

The Monthly Business Survey (MBS) turnover in production industries dataset produces the proportion of turnover from exports by industry and level of turnover and exports (British pounds, millions). However, this is not always comparable with UK trade statistics. Further information on UK trade and how data on it are compiled can be found in the UK trade release.